Missiles (Contracts)

Oral Answers to Questions — Ministry of Aviation – in the House of Commons at 12:00 am on 15th April 1964.

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Photo of Mr Frank Allaun Mr Frank Allaun , Salford East 12:00 am, 15th April 1964

asked the Minister of Aviation why cost-plus con-tracts were undertaken for the three missiles Sea slug, Thunderbird and Fire-streak, which were originally estimated To cost £8 millions and which were later estimated in the Auditor-General's report to have cost £110 millions, which resulted in the taxpayer bearing the extra cost, whereas a fixed-price contract was agreed on for the Bloodhound contract which gave Ferranti's a £4 millions profit.

Photo of Mr Julian Amery Mr Julian Amery , Preston North

The contracts for the development of the Bloodhound missile were on the same basis as those for the development of the Seaslug, Thunderbird and Firestreak missiles, namely cost plus.

The contracts for the production of the Bloodhound missile were on the same basis as the contracts for the production of Seaslug, Thunderbird and Firestreak, namely fixed price.

Photo of Mr Frank Allaun Mr Frank Allaun , Salford East

Has not the result been that where there has been a colossal loss the taxpayers have had to bear it, but where there has been an excessive profit it has gone to the firm, so the public never get the benefit—they always lose?

Photo of Mr Julian Amery Mr Julian Amery , Preston North

I think that the hon. Gentleman should specify his charge if he is going to pursue it. I had the impression that his Question was put down on the misunderstanding that the contracts were placed differently for the Bloodhound than for the other three missiles. In fact, the contracts for the development of the Bloodhound were exactly on the same basis as those for the other three, and for the production exactly the same applies.

Photo of Mr Emanuel Shinwell Mr Emanuel Shinwell , Easington

Can the right hon.. Gentleman say whether the figures mentioned in the Question are correct on the disparity between the original estimate and the actual cost?

Photo of Mr Julian Amery Mr Julian Amery , Preston North

I would not wish to mislead the right hon.. Gentleman. I should like to look into that more carefully I was under the impression that the Question was entirely misconceived and the assumptions false and that I tried to correct by explaining that the contracts were on the same basis and not on different bases. I would not wish to mislead the right hon.. Gentleman I will look into the question of individual figures and let him know. But they appear to be quotations from reputed sources.

Photo of Mr John Cronin Mr John Cronin , Loughborough

Is not the important question here that there should be no question of excessive profits on the part of the Bloodhound if proper precautions and proper alertness had taken place in the Ministry of Aviation?

Photo of Mr Julian Amery Mr Julian Amery , Preston North

As the hon.. Gentleman knows, Sir John Lang is conducting an inquiry, and I am naturally looking Departmentally at the problem myself to see whether any changes are required in our organisation. I should not wish to anticipate the outcome of these inquiries, but there will, no doubt, be an opportunity to discuss them.

Photo of Sir Arthur Harvey Sir Arthur Harvey , Macclesfield

Is my right hon. Friend aware that there are, of course, cases when firms take on fixed-price contracts and lose money? To overcome these great problems between the Government and industry, will he see if he cannot get closer to industry by attaching an accountant to each firm as liaison, so that there is a closer working arrangement with the firms and his Ministry? In this way many of the problems would be obviated and he would be kept closely informed of the progress, or lack of progress, being made financially.

Photo of Mr Julian Amery Mr Julian Amery , Preston North

I accept the spirit of the suggestion, and I shall do everything I can to keep in the closest possible touch with industry. Where fixed price contracts are concerned, that is a negotiating process and it is difficult to insure against miscalculation. I hope that Sir John Lang's inquiry and my own investigations at the moment may yield some fruit.